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Amazons new healthcare company could give smaller healthtech players a boost

JPMorgan Chase and Berkshire Hathaway have joined forces with Amazon to form a new healthcare company for all U.S. employees. Right now details are so sparse there’s not even a name associated with the new company. However, this is big news for the industry, and it could possibly have ramifications not only for health insurance giants, but also smaller tech companies that are open to either partnering with the company — or even being acquired by it.

The decision didn’t come overnight. According to reports , the heads of each company — Jamie Dimon, Warren Buffet and Jeff Bezos — have chatted for years about how to fix the problem of high costs and a broken healthcare system.

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy, ” Buffet said in a statement out this morning. “We share the notion that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient gratification and outcomes.”

But others in tech have tried to jump into healthcare only to get bogged down with regulatory obstacles. Theranos founder Elizabeth Holmes, who did not have a medical background, ran into regulatory issues and was ultimately banned from operating in her own labs due to health and safety concerns.

Google parent company Alphabet is known for dipping its toe in the healthcare waters, with Calico and Verily Life Science. However, Google shut down its health management platform Google Health after it failed to gain traction.

Bezos has acknowledged the difficulties for tech companies in the space, saying the healthcare system is “complex” and that the three “ . . . enter into this challenge open-eyed about different degrees of difficulty.”

Companies that have succeeded in healthcare have largely been those with a background in the industry, Mendelson points out. However, the allure to get into the space has fueled plenty of tech company endeavors, especially in the last year. Apple recently launched a feature with its iOS update to allow users to upload medical record and Amazon has already been rumored to be in talks with drug makers.

And stronger technological chops is something the industry needs moving forward. Amazon is in a position to provide these measures with machine learning, AI, online communications and other tools needed to make a more efficient and effective system. But it will likely require outside help from health experts, and it remains to be seen how these three iconic companies plan to move the ball forward without industry understanding.

Collective Health founder Ali Diab has one, perhaps unsurprising suggestion: that the new company that’s being formed work with Collective Health.

Collective Health offers companies healthcare coverage through a cloud-based, incorporated health benefits platform for self-insured employers and, as Diab points out, has been providing that solution for the last five years to big companies like eBay and Restoration Hardware.

“I proposed to they concentrate precisely on what we are already doing, which is build infrastructure that knits everything together, ” Diab says. “It’s not stuff that people watch. It’s all the infrastructure to ingest data from various sources, process claims, to make that data analyzable, to build machine learning and AI-based systems on top of it that help identify people that need care way before they might even know.”

JPMorgan Chase, Berkshire Hathaway and Amazon could potentially snap up smaller tech companies like Collective Health that are working on these types of answers, as well.

“It would not surprise me to see them start to acquire some of the technology that induces their goals possible, ” says Mendelson. “This team is very capable from a consolidations and acquisitions standpoint. That’s not an accident.”